Merck CEO Frazier stands by his $8B R&D gamble

Just after Pfizer wowed Wall Street with its promise to slash billions in R&D costs--while hinting at plans to spin off its non-pharma businesses--Merck CEO Kenneth Frazier (photo) caused something of a letdown as he promised to keep the pedal to the metal on its $8 billion-plus R&D budget for the year. And even as he promises to gradually ratchet down R&D as a percentage of revenue, the top exec isn't planning anything like the wholesale restructuring that has been under way at some of its top rivals.

"I'd expect research and development (spending) as a percentage of sales will decline over time," Frazier tells Reuters. "We actually don't want to overspend."

As Reuters notes, Merck could theoretically continue to increase the dollars it spends on R&D and drop the percentage factor--provided the giant pharma company can increase its revenue. That will depend heavily on new drugs designed for cholesterol, blood pressure and cervical cancer. The insomnia drug MK-4305 should be ready for the FDA in 2012, says research honcho Peter Kim, while odanacatib for osteoporosis can be ready for regulators in 2013.

Merck's attitude toward R&D marks a decided split among the Big Pharma brethren on their approach to new drug development. While Pfizer, GlaxoSmithKline and Sanofi have vowed to take the road toward "open innovation"--cutting costs as they look more to outside investigators for new ideas--Merck, Lilly and Novartis are holding the line on multibillion-dollar budgets as they promise to deliver new approvals on blockbuster programs. We'll know in a few years which side has the better approach.